One risk of IPOs: patent lawsuits

One management risk chief intellectual property officers should take into account when the company is considering an IPO is that they will be hit with patent lawsuits. Take Facebook, for example. “Last year, Facebook was named as a defendant in 22 lawsuits accusing it of patent infringement, double the number from 2010,” notes mybroadband.co.za. “The attacks against Facebook signal that social media has become a new front in the Silicon Valley patent wars.”

Before they filed an IPO, neither on-line game developer Zynga, Groupon, or LinkedIn ever had a suit filed against them. When they went public in 2010, the patent lawsuits rained down against them. IPOs make aggregators think they can quickly win a settlement from companies.

Ron Laurie, a specialist in IP and investment banking, cofounder of Inflexion Point Strategy and a member of BVR’s Intellectual Property Management & Valuation Reporter editorial board, told mybroadband.co.za, companies are most vulnerable to patent challenges when they file their intention to go public with a form S1 with the U.S. Securities and Exchange Commission. “You just knew when you filed the S1, the letters would start rolling in,” he said.